Draft

The relationship between MiCAR and MAR: a brief updated

introduction based on the guidelines of the European
Securities and Markets Authority*

DIOGO PEREIRA COELHO*

ALBERTO JOSÉ FIGUEIREDO*

MANUEL QUELHAS POÇAS*

Summary: Abstract. Introduction. I. Introduction to the MiCAR market abuse prevention regime. 1.
Scope of the rules on market abuse. 2. Inside information 3. Public disclosure of inside information. 4.
Interpretation of the European Securities Markets Authority. II. Prevention and prohibition of market
abuse linked to crypto-assets. 1. Prohibition of abuse and unlawful disclosure of inside information 2.
Prohibition of market manipulation 2.1. Market manipulation. 2.2. Trading strategies considered lawful.
2.3. Forms of market manipulation considered illegal. 2.4. Forms of market manipulation identified in the
crypto-assets market. 3. Prevention and detection of market abuse. 4. administrative sanctions and other
administrative measures. Conclusion.

Abstract
Measures to ensure equal access to information and fair pricing in traditional financial
markets have been the subject of harmonization throughout the European Union since
the beginning of the 21st century, culminating in the Market Abuse Regulation (MAR)1.
With the entry into force of the Regulation on Markets in Crypto-Assets (MiCA or
MiCAR)2, some questions have arisen regarding the relationship between these two
pieces of legislation. This article aims to contribute to the study and understanding of

* This article consists of the updated and translated version of the article: DIOGO PEREIRA COELHO &
ALBERTO JOSÉ FIGUEIREDO, “Da relação entre o MiCA e o MAR: brevíssima introdução”, in JOÃO
VIEIRA SANTOS, JOÃO LUZ SOARES, MARTINHO LUCAS PIRES & GULHERME MAIA, MiCA – Estudos sobre
a nova Regulação Europeia de Criptoativos, Almedina, 2023, pp. 89-113, https://www.fnac.pt/MICA-
Regulamento-UE-2023-1114-Relativo-aos-Mercados-de-Criptoativos-Joao-Vieira-dos-Santos/a11296007
(last consulted on 30.06.24).
* Diogo Pereira Coelho is Founding Partner at Sypar, Lawyer, PhD Student in Law and Taxation (Crypto
Taxation), and holds a Master's Degree in Law and Legal Practice in the specialty of Corporate Law.
* Alberto José Figueiredo is Founding Partner at Sypar, Guest Lecturer at IPG, Trainee Lawyer,
Economist, PhD Student in Economics, Companies & Social Sciences, and holds a Master’s Degree in
Management in the field of Entrepreneurship and Innovation.
*
Manuel Quelhas Poças is an External Advisor at Sypar, Master in Law and Management, and played an
indispensable role in the investigation, collection, treatment and analysis of new elements resulting from
the guidelines issued by the European Supervisory Authorities, as well as in the translation into English
of this text and in the review of both versions.
1
Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on
market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament
and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC, https://eur-
lex.europa.eu/legal-content/pt/TXT/?uri=CELEX%3A32014R0596 (last consulted on 30.06.24).
2
Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on markets
in crypto-assets, and amending Regulations (EU) No 1093/2010 and (EU) No 1095/2010 and Directives
2013/36/EU and (EU) 2019/1937, https://eur-lex.europa.eu/legal-
content/PT/TXT/?uri=CELEX:32023R1114 (last consulted on 30.06.24).

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this relationship. To this end, a critical-descriptive analysis is carried out, structured in

two chapters. The first introduces the market abuse prevention regime provided for in
MiCAR, which includes the scope of the rules on market abuse, the definition of inside
information and the respective rules on public disclosure. The second deals with the
prevention, detection and prohibition of market abuse linked to crypto-assets, including
administrative sanctions. In both chapters, the most recent guidelines from European
Supervisory Authorities are taken into account.

Introduction
One of the “advantages” associated with technological progress and the recent
phenomenon of crypto-assets and decentralized finance (commonly known by the
abbreviation DeFi) is the “return to the past”. This return does not occur through “time
travel”, but through the abolition of principles (such as the principles of full disclosure,
merit regulation or blue-sky laws) that date back to the post-Great Depression era of
1929 and which served as the basis for the construction of the financial law regime in
the US and in most jurisdictions. These principles appear to be fundamental to the
security and proper functioning of the financial markets, as they are designed precisely
to safeguard investors' rights from fraudulent initial public offerings (IPOs)3. In Europe,
market integrity has long been considered a fundamental aspect of investor protection.
Measures guaranteeing equal access to information and fair pricing in relation to
financial instruments have been the subject of harmonization throughout the European
Union since 2003-2004 (with the creation of MiFID I4, etc.), which resulted in the
creation of the E-Money Directive5, the Prospectus Regulation6, MiFID II7, MAR, and

3
See JERRY W. MARKHAM, A Financial History of Modern U.S. Corporate Scandals: From Enron to
Reform, Routledge - Taylor & Francis Group, 2015, 153-158; RONALD J. COLUMBO, “Merit Regulation
via the Suitability Rules”, in Journal of International Business and Law, Vol. 12: Iss. 1, Article 2, 2013,
6-9, https://scholarlycommons.law.hofstra.edu/cgi/viewcontent.cgi?article=1214&context=jibl (last
consulted on 30.06.24); JONATHAN R. MACEY & GEOFFREY P. MILLER, “Origin of the Blue Sky Laws”, in
Texas Law Review, Volume 70, Number 2, 1991, 348-364,
https://heinonline.org/HOL/LandingPage?handle=hein.journals/tlr70&div=17&id=&page= (last
consulted on 30.06.24); JOSÉ FERREIRA GOMES, “Os deveres de informação sobre negócios com pares
relacionadas e os recentes Decretos-Leis n.ºs 158/2009 e 185/2009”, in Revista de Direito das
Sociedades, Ano I - Número 3, Almedina, 2009, 590-591; & LUÍS GUILHERME CATARINO, “Inovação
financeira e ICOs: mercados privados alternativos?”, Publicações CEDIPRE Online - 36, 2019, 15,
https://www.fd.uc.pt/cedipre/wp-content/uploads/pdfs/co/public_36.pdf (last consulted on 30.06.24).
4
Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in
financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC
of the European Parliament and of the Council and repealing Council Directive 93/22/EEC, https://eur-
lex.europa.eu/legal-content/PT/TXT/?uri=CELEX%3A32004L0039 (last consulted on 30.06.24).
5
Directive 2009/110/EC of the European Parliament and of the Council of 16 September 2009 on the
taking up, pursuit and prudential supervision of the business of electronic money institutions amending
Directives 2005/60/EC and 2006/48/EC and repealing Directive 2000/46/EC, https://eur-
lex.europa.eu/legal-content/PT/TXT/?uri=CELEX%3A32009L0110 (last consulted on 30.06.24).
6
Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the
prospectus to be published when securities are offered to the public or admitted to trading on a regulated
market, and repealing Directive 2003/71/EC, https://eur-lex.europa.eu/legal-
content/PT/TXT/?uri=CELEX%3A02017R1129-20211110 (last consulted on 30.06.24); & Commission
Delegated Regulation (EU) 2019/980 of 14 March 2019 supplementing Regulation (EU) 2017/1129 of the

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the Directive on Payment Services in the Internal Market 8 (which together make up a
significant part of European financial law). Due to the lack of regulation of this recent
phenomenon, over the last few years there have been numerous risks associated with the
crypto-assets market, including the risk of fraud, market manipulation and high
volatility9. Considered special assets due to their characteristics (even though they
present practically all the same risks as traditional financial instruments), crypto-assets
that do not qualify as financial instruments fall outside the scope of those regulations
mentioned above, including MAR. However, the new crypto-asset markets have shown
many of the same market abuse practices that can be observed in the traditional
financial sector. In order to mitigate the associated risks, the European Parliament
finally approved MiCAR10, which was inspired by the aforementioned financial
directives and regulations11 and, in abstract form, aims to regulate the crypto-asset
markets. MiCAR includes key provisions for those who issue/offer and trade crypto-
assets, in a new legal framework that aims to support market integrity and financial
stability. These provisions cover strong transparency, disclosure, authorization and
supervision rules, and aim to provide consumers with clear, complete, accurate and

European Parliament and of the Council as regards the format, content, scrutiny and approval of the
prospectus to be published when securities are offered to the public or admitted to trading on a regulated
market, and repealing Commission Regulation (EC) No 809/2004, https://eur-lex.europa.eu/legal-
content/PT/TXT/?uri=CELEX%3A02019R0980-20200917 (last consulted on 30.06.24).
7
Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in
financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU, https://eur-
lex.europa.eu/legal-content/PT/TXT/?uri=celex%3A32014L0065 (last consulted on 30.06.24).
8
Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on
payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU
and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC, https://eur-lex.europa.eu/legal-
content/PT/TXT/?uri=CELEX%3A02015L2366-20151223 (last consulted on 30.06.24).
9
JOÃO VIEIRA DOS SANTOS, “Regulação dos criptoativos”, in Caderno do Mercado de Valores
Mobiliários, No. 64, 2019,
https://www.cmvm.pt/pt/EstatisticasEstudosEPublicacoes/CadernosDoMercadoDeValoresMobiliarios/Do
cuments/CMVM-CADERNOS-n64.pdf (last consulted on 30.06.24).
10
On the special regime of the new regulation, see ANTÓNIO GARCIA ROLO, “A proposta de Regulamento
europeu sobre mercados de criptoativos: breve sumário e análise”, in Revista de Direito das Sociedades
(RDS), February 2021, https://www.revistadedireitodassociedades.pt/artigos/a-proposta-de-regulamento-
europeu-sobre-mercados-de-criptoativos-breve-sumario-e-analise (last consulted on 30.06.24);
GUILHERME MAIA & JOÃO VIEIRA DOS SANTOS, “MiCA and DeFi (“Proposal for a Regulation on Market
in Crypto-assets” and “Decentralized Finance”)”, in Revista Electrónica de Direito, N.º 2 (Vol.28), June
2022, https://cij.up.pt/client/files/0000000001/4-guilherme-maia_1922.pdf (last consulted on 30.06.24);
JOÃO VIEIRA DOS SANTOS, “Challenges in Imposing Requirements on Offerors of Crypto-assets”, in
Fintech Regulation and the Licensing Principle, DÁRIO MOURA VICENTE, DIOGO PEREIRA DUARTE, &
CATARINA GRANADEIRO, European Banking Institute, CIDP, 2023, https://ebi-europa.eu/wp-
content/uploads/2023/02/eBook-22Fintech-Regulation-Licensing-Principle-2-2023.pdf (last consulted on
30.06.24); & JOÃO VIEIRA DOS SANTOS, “Regulação dos criptoativos”, in Caderno do Mercado de
Valores Mobiliários, N.º 64, 2019,
https://www.cmvm.pt/pt/EstatisticasEstudosEPublicacoes/CadernosDoMercadoDeValoresMobiliarios/Do
cuments/CMVM-CADERNOS-n64.pdf (last consulted on 30.06.24); DIRK A. ZETZSCHE, FILIPPO
ANNUNZIATA, DOUGLAS W. ARNER & ROSS P. BUCKLEY, “The Markets in Crypto-Assets
Regulation(MICAR) and the EU Digital Finance Strategy”, in EBI Working Paper Series 2020 - no. 77,
2020, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3725395 (last consulted on 30.06.24);
ANTÓNIO GARCIA ROLO, “Criptoativo – conceito, modalidades, regime e distinção de figuras afins”, in
CIDP Research Paper Series, CIDP, N.º 18, July 2022,
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4123583 (last consulted on 30.06.24).
11
MAIA, GUILHERME, & VIEIRA DOS SANTOS, JOÃO, “MiCA and DeFi...”, op. cit. note 10, 3-4.

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concrete information about the risks, costs and expenses associated with to their
operations12. As we will see later in this document, in order to prevent money
laundering, terrorist financing and other criminal activities, MiCAR also includes
measures against market abuse and manipulation that are very similar to those
established by MAR.

I. Introduction to the MiCAR market abuse prevention regime

1. Scope of market abuse rules
Whereas (7) of MAR states that market abuse is the concept that covers illicit conduct
in the financial markets and consists of insider trading, the illicit transmission of inside
information and market manipulation. It were precisely these concepts that were carried
over to MiCAR, because, just as in traditional financial markets, this type of conduct
prevents full, adequate and indispensable transparency for the operations of all
economic agents in the crypto-assets market. Under the terms of Article 1(2)(e) of
MiCAR, among others, the purpose of the regulation is to establish measures “to
prevent insider dealing, unlawful disclosure of inside information and market
manipulation related to crypto-assets, in order to ensure the integrity of markets in
crypto-assets”. Even so, the concepts and associated measures have been transported in
a light version and with a considerable degree of flexibility.
In terms of comparison, one of the main differences between the market abuse
prevention regime provided for in MAR and its counterpart in MiCAR lies precisely in
the scope and strictness of the rules. In adapting the rules, the less significant size of
issuers/ offerors operating in the crypto industry has been taken into account, essentially
with a view to avoiding the imposition of measures that cause a disproportionate
administrative burden13. This is what results from whereas (95) of MiCAR, which,
despite admitting the importance of ensuring “confidence in markets in crypto-assets
and the integrity of those markets”, and that it is “necessary to lay down rules to deter
market abuse”, also admits that “issuers of crypto-assets and crypto-asset service
providers are very often SMEs”14 and, thus, that “it would be disproportionate to apply
all of the provisions” of MAR to these companies. This reasoning is also reflected in
whereas (55) of MAR, which states that the duty to disclose inside information may
represent a “burden” for SMEs whose financial instruments are traded on growing SME
markets. By “burden”, it is meant that the costs associated with verifying information

12
DIOGO PEREIRA COELHO, “A aprovação do regulamento MiCA: algumas notas”, Observador, May
2023, https://observador.pt/opiniao/a-aprovacao-do-regulamento-MiCAR-algumas-notas/ (last consulted
on 30.06.24).
13
WATSON LAW, “MiCAR - Market Abuse Prevention under MiCAR”, Blog, 2023,
https://watsonlaw.nl/en/MiCAR-market-abuse-prevention-under-MiCAR/ (last consulted on 30.06.24).
14
Defined by the Commission Recommendation of 6 May 2003 concerning the definition of micro, small
and medium-sized enterprises (Text with EEA relevance) (notified under document number C(2003)
1422), https://eur-lex.europa.eu/legal-content/PT/TXT/?uri=celex%3A32003H0361 (last consulted on
30.06.24).

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and obtaining legal advice to determine when and if this information should be
disclosed15 (a reality that startups in this industry are well aware of).
In this sense, in a very concise manner, the market abuse prevention regime is found in
Title V of MiCAR, specifically in Articles 76 to 80, and provides for rules that are
materially similar to those provided for in MAR and applicable to parallel conduct in
relation to financial instruments16. Pursuant to Article 86(1) of MiCAR, the rules on
market abuse apply to any person who is involved in acts relating to crypto-assets that
are admitted to trading or for which a request for admission to trading has been made17.
As follows from paragraphs 2 and 3 of the same article, these rules are also applicable
to any transaction, order or conduct related to crypto-assets mentioned in paragraph 1,
regardless of whether they take place on a trading venue, as well as to actions and
omissions both in the EU and in third countries. In these terms, the regimes applicable
to crypto-assets service providers (also known by the abbreviation “CASPs”) and
market abuse apply comprehensively to all subcategories of crypto-assets that fall
within the subjective scope of MiCAR, including most crypto-assets with utility and
monetary functions. Excluded are crypto-assets with investment functions that are
considered financial instruments and subject to the regimes of the prospectus regulation,
MiFID II and MAR18. In this regard, it should be noted that whereas (97) of MiCAR
clarifies that a derivative that is considered a financial instrument within the scope of
MiFID II and whose underlying asset is a crypto-asset is subject to MAR when traded
on a regulated market, a multilateral trading facility or an organized trading facility19. In
addition, any crypto-asset that falls within the scope of MiCAR and is simultaneously
an underlying asset of such derivatives should be subject to MiCAR's market abuse
provisions.

2. Inside information
According to whereas (96) of MiCAR, in order to strengthen the legal certainty of
participants in the crypto-assets markets, it is necessary to characterize two of the
essential elements in order to define inside information: (i) the exact nature of that
information; and (ii) the importance of its potential effect on the prices of crypto-assets.
These elements must be considered for the prevention of market abuse in the crypto-
assets markets and their operation, taking into account, in particular, the use of social
networks, smart contracts for order execution and the concentration of mining pools.

15
Nevertheless, according to whereas (55) of MAR, the legislator believes that the immediate disclosure
of inside information is essential to guarantee investor confidence in these issuers. Therefore, ESMA
should be able to publish guidelines to help issuers comply with their disclosure obligations without
compromising investor protection.
16
GARCIA ROLO, ANTÓNIO, “Criptoativo...”, op. cit. note. 10, 23.
17
See whereas (95) of MiCAR.
18
GARCIA ROLO, ANTÓNIO, “Criptoativo…”, op. cit. note 10, 23.
19
See Commission Regulation (EC) No 1287/2006 of 10 August 2006 implementing Directive
2004/39/EC of the European Parliament and of the Council as regards record-keeping obligations for
investment firms, transaction reporting, market transparency, admission of financial instruments to
trading, and defined terms for the purposes of that Directive, https://eur-lex.europa.eu/legal-
content/PT/TXT/?uri=CELEX%3A32006R1287 (last consulted on 30.06.24).

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Although adapted, these two essential elements of distinction that are presented in
MiCAR are in line with the essential elements of distinction presented in whereas (18)
of MAR, which states that legal certainty “for market participants should be enhanced
through a closer definition of two of the elements essential to the definition of inside
information, namely the precise nature of that information and the significance of its
potential effect on the prices of the financial instruments, the related spot commodity
contracts, or the auctioned products based on the emission allowances”. Following this
logic, for the purposes of MiCAR, as can be seen from Article 87(1)(a), inside
information includes “information of a precise nature, which has not been made public,
relating, directly or indirectly, to one or more issuers, offerors or persons seeking
admission to trading, or to one or more crypto-assets, and which, if it were made public,
would likely have a significant effect on the prices of those crypto-assets or on the price
of a related crypto-asset”. In the case of “persons charged with the execution of orders
for crypto-assets on behalf of clients”, as follows from sub-paragraph b) of the same
paragraph, inside information also includes “information of a precise nature conveyed
by a client and relating to the client’s pending orders in crypto-assets”.
In material terms, MiCAR covers the same types of information set out in Article
7(1)(a) and (b) of MAR, albeit described in an adapted form. The same applies to
Article 87(2), (3) and (4) of MiCAR. In short, according to these articles, inside
information is considered accurate when it indicates a set of existing or foreseeable
circumstances and is sufficiently specific to allow conclusions to be drawn about its
possible effect on the prices of crypto-assets (paragraph 2). In the case of an ongoing
process resulting in future circumstances, these circumstances and related intermediate
steps may be considered inside information (paragraphs 2 and 3). Regarding
information that, if made public, would be likely to significantly influence the prices of
crypto-assets, it consists of information that “a reasonable holder of crypto-assets would
likely use as part of the basis of the holder’s investment decisions” (paragraph 4).

3. Public disclosure of inside information

Information is a basic requirement in the composition of economic relations and is a
determining factor in the decision-making process of both individuals and companies.
In turn, corporate transparency is one of the key elements of markets and is decisive for
economic growth20. The absence or insufficiency of information limits the efficiency of
the decision-making process of economic agents21. In the absence of information rights

20
JOSÉ FERREIRA GOMES believes that the disclosure of information plays perhaps the most important role
in market efficiency, both directly and indirectly. Directly, essentially because of its impact on the capital
markets and on the labor market for directors. Indirectly, insofar as both insiders and outsiders can make
use of different corporate governance mechanisms. See JOSÉ FERREIRA GOMES, “Os deveres de
informação...”, op. cit. note 3, 589.
21
It should be noted that information asymmetry is inherent in relations between economic agents, mainly
due to uncertainty, opportunism, limited rationality, complexity and the nature of the business that takes
place in an ever-changing environment. In studies relating to cost theory, in his 1937 work The Nature of
the Firm, Ronald Coase argued that the market operates on the basis of costs, which he called transaction
costs. These transaction costs can be broken down into the cost of obtaining information and knowledge

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and duties that specify rules and standards for form, content and quality, the
presentation of information may occur in an “idiosyncratic” way, which is not what is
intended. As such, corporate and financial scandals have resulted in multiple regulatory
measures for full disclosure22. In this sense, substantive solutions to various practices
have been overlooked23 in favor of increasing information duties24. The justification lies
in the fact that these duties favor transparency, the prevention of illicit behavior by
directors and subsequent accountability. In other words, they act as a weapon in the
fight against corporate structures that do not follow best practices25. The disclosure and
provision of accurate, complete, and timely information is seen as an essential element
in strengthening relationships of trust between individuals in the context of legal
commerce26. In order to contribute to the proper functioning of corporate governance
and the effective fulfillment of the duties of corporate bodies, in recent years the various
legal systems have enacted laws27 whose scope is based, precisely, on the principle of
disclosure of information and thus on the principle of transparency28. The importance of
information justifies the legislator's caution in expressly providing that information

and the cost of contracts. See JANINA DAMBROS DE ABREU, ALEX DONEGA, PERY FRANCISCO ASSIS
SHIKIDA & WEIMER FREIRE DA ROCHA, “Assimetria de informação e o caso dos cooperados do Sicoob
Oeste”, in Revista de Empresarial, RDEmp, Ano 12 - n.º 3, 2015, 36 e 37.
22
The full disclosure model aims to eliminate information asymmetries and was structured in the 1930s
(following the post-1929 Great Depression) through two “cornerstone laws”: the Securities Act of 1933
and the Securities Exchange Act of 1934. See JOSÉ FERREIRA GOMES, “Os deveres de informação...”, op.
cit. note 3, 590-591.
23
In Portuguese company law, information and information duties have historically played a clearly
ancillary role to the substantive rules that impose or prohibit certain conduct. Information is therefore, in
general, the means by which the various recipients are made aware of the facts they need in order to carry
out their duties in company life. On the other hand, information plays a key and fundamental role in the
entire securities law system. These differences stem from the different origins of these two laws. While
commercial company law was shaped by German, French, Italian and Anglo-Saxon guidelines, securities
law mostly follows the North American model of full disclosure, a model which has influenced the EU
law that was transposed into domestic law. See JOSÉ FERREIRA GOMES, “Os deveres de informação...”,
op. cit. note 3, 590.
24
This neglect is accompanied by a deepening of repressive and sanctioning strategies. See MADALENA
PERESTRELO DE OLIVEIRA, “Transparência no mercado de capitais: information overload, eficiência ou
tutela dos investidores?”, in Revista de Direito das Sociedades, Ano VIII - Número 4, Almedina, 2016,
pp. 788 and 789.
25
MADALENA PERESTRELO DE OLIVEIRA, “Transparência no mercado de...”, op. cit. note 24, 791.
26
MADALENA PERESTRELO DE OLIVEIRA, “Transparência no mercado de...”, op. cit. note 24, 789.
27
When enacting laws in this area, it is up to the legislator or regulator to justify the extent to which the
proposed rule (both objectively and subjectively) contributes to achieving a more positive result than that
which would be obtained by market forces. See JOSÉ FERREIRA GOMES, “Os deveres de informação...”,
op. cit. note 3, 597.
28
It should be noted that this principle of transparency is also present in corporate governance, which
encompasses a set of valid maxims for responsible, long-term wealth-creating company management,
company control and transparency. See ANTÓNIO MENEZES CORDEIRO, “Os deveres fundamentais dos
administradores das sociedades”, in Revista da Ordem dos Advogados Portugueses, Vol. II, 2006,
https://portal.oa.pt/comunicacao/publicacoes/revista/ano-2006/ano-66-vol-ii-set-2006/doutrina/antonio-
menezes-cordeiro-os-deveres-fundamentais-dos-administradores-das-sociedades/ (last consulted on
30.06.24). See also FIAMMETTA S. PIAZZA, “Bitcoin and the Blockchain as Possible Corporate
Governance Tools: Strengths and Weaknesses”, in Penn State Journal of Law & International Affairs,
Issue 2, Volume 5, 2017, 288, https://elibrary.law.psu.edu/cgi/viewcontent.cgi?article=1163&context=jlia
(last consulted on 30.06.24).

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duties are divided among the most diverse pieces of legislation29. Although there are
several examples of voluntary coordination between issuers, the creation of legal and
regulatory information duties allows for the faster implementation of common
disclosure and information standards30. This is the case with MiCAR and MAR. One of
the ways to prevent market abuse and manipulation is to ensure that all market
participants have access to the same information31. As can be seen from Article 88(1), in
order to achieve this objective, MiCAR requires issuers to publicly disclose inside
information about their company and crypto-assets as soon as possible and in a way that
ensures its rapid and widespread distribution to the public. Under Article 88(2)(a) and
(3) of the same law, in some cases issuers may choose to delay the disclosure of inside
information, but only in circumstances where to do otherwise would harm the legitimate
interests of the company. According to subparagraphs b) and c) of the same paragraph,
for such delays to be legal, they must not be likely to mislead the public, and the
confidentiality of the information in question must be guaranteed.
Some illustrative examples of the legitimate interests of issuers can be found in the
European Securities and Markets Authority (ESMA) guidelines on MAR32, which
mention situations in which issuing companies are in the process of negotiating some
kind of restructuring or reorganization, such as mergers, acquisitions or spin-offs. The
outcome of such negotiations could be jeopardized by immediate disclosure. In
addition, there are cases where the financial viability of a particular issuer is at stake and
immediate disclosure could threaten the successful conclusion of recovery negotiations.
Disclosure of information about such events could cause mass takeovers or, on the
contrary, panic in the market, which fundamentally alters the circumstances surrounding
a particular transaction or deal33. In this respect, it should be noted that the information
disclosed by commercial companies is presented according to the type of company and
according to the vissitudes aroused by a certain way of operating34. The way in which
the information is disclosed demonstrates the fact that it is directed at certain aspects
and aimed at certain subjects35. In order to ensure the consistent application of this

29
DIOGO DRAGO, O Poder de Informação dos Sócios nas Sociedades Comerciais, Almedina, 2009
Edition, p. 229.
30
JOSÉ FERREIRA GOMES, “Os deveres de informação...”, op. cit. note 3, 601.
31
Curiously, instead of the decentralized model, the centralist model of the economy is characterized by
the problem of informational asymmetry. See PEDRO MARTINS, Introdução à Blockchain – Bitcoin,
Criptomoedas, Smart contracts, Conceitos, Tecnologia, Implicações, Data Protection, FCA – Editora de
Informática, 1.ª Edição, 2018, 142.
32
EUROPEAN SECURITIES MARKETS AUTHORITY (ESMA), MAR Guidelines - Information relating to
commodity derivatives markets or related spot markets for the purpose of the definition of inside
information on commodity derivatives, ESMA/2016/1480 EN, 2017,
https://www.esma.europa.eu/sites/default/files/library/esma-2016-
1480_mar_guidelines_on_commodity_derivatives.pdf (last consulted on 30.06.24).
33
WATSON LAW, “MiCAR - Market Abuse Prevention…”, op. cit. note 13.
34
It is important to distinguish between “heterodetermined” and “self-determined” information. In the
first case, it is not up to the obliged party to provide the information and determine what they have to
disclose. In the second, and unlike the previous case, the information is determined by the person subject
to the obligation. The main difference lies above all in the person who determines the information to be
provided or disclosed. See DIOGO DRAGO, O Poder de Informação dos Sócios..., op. cit. note 29, 225 &
229.
35
DIOGO DRAGO, O Poder de Informação dos Sócios..., op. cit. note 29, 293.

8
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Article, ESMA shall be responsible for developing draft implementing technical

standards (ITS) establishing the technical means for the proper public disclosure of
inside information referred to in Article 88(1) of MiCA, and for postponing the public
disclosure of inside information referred to in paragraphs 2 and 3 of that Article.

4. Interpretation of the European Securities Markets Authority

In October 2023, taking into account the similarity between the provisions of MAR and
MiCA, as well as the ITS related to MAR, ESMA launched a public consultation aimed,
among other things, at proposing the ITS concerning paragraphs 1, 2, and 3 of Article
88 of MiCA36.
Regarding the public disclosure of privileged information, ESMA believes that the
initial part of Article 88(1) of MiCAR implies an active dissemination of information37.
To avoid imposing the duty to seek/ collect information on the target audience, mere
disclosure of information through the website is not sufficient to ensure the fastest and
widest distribution. In this sense, ESMA considers that active dissemination and
publication on the website should be regarded as two distinct obligations aimed at
achieving different objectives38. On the one hand, active dissemination aims to ensure
the distribution of information through communication channels used by the public to
seek/ collect information (Article 3 of the ITS). The communication channels used
should encompass specific channels adapted to the particularities associated with the
channels used by crypto communities (Article 3(3), of the ITS), such as social networks
or other equivalent platforms (or even, if they allow such disclosures, the trading
platforms' own websites)39. On the other hand, publication on the website represents a
reliable source that can ensure the reliability of the information disclosed through other
communication channels (Article 2 of the ITS)40. Moreover, the information disclosed
through other communication channels should include a direct link to the publication on
the website41. The text of the publication on the website should be downloadable and
written in a way that ensures the media can spontaneously find and understand the

36
EUROPEAN SECURITIES MARKETS AUTHORITY (ESMA), Consultation Paper - Technical Standards
specifying certain requirements of Markets in Crypto Assets Regulation (MiCA) - second consultation
paper, 2023, ponto 282, https://www.esma.europa.eu/press-news/consultations/second-consultation-
technical-standards-specifying-certain-requirements (last consulted on 30.06.24).
37
EUROPEAN SECURITIES MARKETS AUTHORITY (ESMA), Consultation…, op. cit. note 36, ponto 284.
38
EUROPEAN SECURITIES MARKETS AUTHORITY (ESMA), Consultation…, op. cit. note 36, ponto 285.
39
EUROPEAN SECURITIES MARKETS AUTHORITY (ESMA), Consultation…, op. cit. note 36, ponto 292. In
fact, ESMA seems to recognize the important role of social media in this sector, particularly in the
exchange of information between investors. ESMA also acknowledges that other platforms that aggregate
information or data about crypto-assets, such as market data, market analysis, research, and news,
likewise constitute one of the main communication channels. Nevertheless, ESMA warns that such
communication channels cannot have usage policies that are discriminatory or that impede free access to
information. For instance, the requirement for subscription or registration, as well as access by invitation
or access to information in closed groups, may constitute discriminatory practices that hinder free access
to information. See points 294 to 298.
40
EUROPEAN SECURITIES MARKETS AUTHORITY (ESMA), Consultation…, op. cit. note 36, ponto 286.
41
EUROPEAN SECURITIES MARKETS AUTHORITY (ESMA), Consultation…, op. cit. note 36, ponto 296.

9
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privileged information and proceed with its dissemination42. The privileged information
published on the website should be written in one of the official languages of the
Member State of origin or in a commonly used language in the international financial
sector (i.e., in English, as clarified by ESMA), as is the case with the crypto-asset white
paper (under Article 6(9), of MiCA) or even in the case of the operating rules of a
crypto-asset trading platform (under Article 76(4), of the same regulation). To promote
rapid access to information, the website should also allow investors to receive voluntary
notifications about new publications. In summary, with some particularities, these
interpretations align with the provisions of the ITS related to MAR and essentially aim
to ensure free access to information and facilitate the identification of relevant
privileged information on the website43.
Regarding the postponement of the public disclosure of privileged information
mentioned in paragraphs 2 and 3 of Article 88 of MiCAR, Article 4 of the draft ITS
establishes that issuers, offerors, or persons requesting admission to trading must store
information related to the postponement in a manner that ensures accessibility,
readability, and maintenance in a durable medium (paragraph 1). The same article
outlines how the national competent authority must be notified of the postponement of
disclosure, as well as the elements that must be included in this notification (paragraph
2). To ensure the integrity and confidentiality of the content of the information, and its
rapid transmission, the national competent authority must be informed in writing and
through secure electronic means provided by the same authority. The notification must
contain the identification of the person responsible for communicating the
postponement and elements (including temporal elements) that allow the national
competent authority to assess whether the conditions for postponement have been met,
that is, to verify the aspects that led to the creation of the privileged information, as well
as the decision to postpone its disclosure (paragraph 3)44.

II. Prevention and prohibition of market abuse linked to crypto-assets

1. Prohibition of abuse and unlawful disclosure of inside information
Article 89(1) of MiCAR45 explains that insider trading occurs when a person has access
to inside information and uses that information to buy or sell, directly or indirectly,
crypto-assets to which the information relates, on their own behalf or on behalf of third
parties. It is also considered insider trading to use inside information to cancel or

42
EUROPEAN SECURITIES MARKETS AUTHORITY (ESMA), Consultation…, op. cit. note 36, ponto 286.
43
EUROPEAN SECURITIES MARKETS AUTHORITY (ESMA), Consultation…, op. cit. note 36, ponto 288.
44
EUROPEAN SECURITIES MARKETS AUTHORITY (ESMA), Consultation…, op. cit. note 36, pontos 299 a
301.
45
As is clear from its paragraph 5, Article 89 applies to any person who possesses inside information by
virtue of being: (i) a member of the administrative, management or supervisory bodies of the issuer; (ii)
the offeror or the person asking for admission to trading, holding a stake in the capital of the issuer; (iii)
the offeror or the person asking for admission to trading, having access to the information by way of
employment, profession or function; or (iv) by virtue of their role in distributed ledger technology or
similar technology. It shall also apply to any person who has inside information in circumstances other
than those specified in paragraph 1 and where that person knows or ought to know that it is inside
information.

10
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modify an order related to a crypto-asset to which that information refers, when the
order was placed before the person had access to the inside information. Insider trading
also includes the submission, modification or withdrawal of an offer, by a person on
their own behalf or on behalf of a third party. Pursuant to paragraph 2 of the same
article, it is forbidden for any person to commit or attempt to commit insider trading, as
well as to use inside information about crypto-assets to acquire or dispose such crypto-
assets, directly or indirectly, either on their own behalf or on behalf of a third party. It is
also prohibited to recommend that third parties commit insider trading or to incite them
to do so (no. 2). No person who possesses inside information on crypto-assets may
recommend or incite another person to acquire or dispose such crypto-assets, nor cancel
or change an order relating to such crypto-assets (no. 3). The use of a recommendation
or inducement constitutes insider dealing if the person using the recommendation or
inducement knows or ought to know that it is based on inside information (paragraph 4).
Pursuant to Article 90(2) of MiCAR, if the person making the recommendation or
inducement knew, or ought to have known, that it was based on inside information, the
subsequent disclosure of the aforementioned recommendation or inducement constitutes
unlawful disclosure of inside information.

Within the scope of these rules, there are some differences between MiCAR and MAR.
To ensure better monitoring and compliance with market abuse rules, under the terms of
Article 18, MAR requires issuers of financial instruments to prepare and maintain lists
of insiders, identifying all persons who have access to inside information by virtue of
their occupation within the company. As is clear from whereas (57), these lists can be
used by companies or by these people to control the flow of inside information and thus
help manage confidentiality obligations. In addition, such lists can be a useful tool for
the competent authorities to identify any person who has access to inside information
and the date on which they obtained it. However, according to MiCAR, issuers of
crypto-assets will not have these obligations. Whereas (56) of MAR explains why,
albeit indirectly. Lists of insiders are important for investigating possible market abuse,
but national differences in the data included in these lists create unnecessary
administrative costs for companies. In order to reduce these costs, the EU has
standardized the data fields that must appear on insider lists. In addition, the obligation
to maintain and constantly update insider lists creates administrative burdens, especially
for companies in growing SME markets. This is the case in the crypto industry, as it is
assumed that the competent authorities can exercise effective control over market abuse
without having permanent access to the lists of these companies. In this logic, these
companies should be exempted from this obligation in order to reduce the
administrative costs imposed by MiCAR. In the case of MAR, these companies must
submit a list of insiders to the competent authorities on request. In the case of MiCAR,
no such reference is made.
Similarly, although this is a requirement for issuers of financial instruments under
MAR, entities covered by MiCAR do not need to notify the competent authorities
whenever members of their governing bodies carry out transactions for their own

11
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account and with crypto-assets issued by their own “employer”46. In this regard, it
should be noted that Article 19(11) of MAR, relating to directors' transactions, provides
that a director of an issuer must not carry out, for his own account or for the account of
a third party, directly or indirectly, any transaction relating to shares, debt securities of
the issuer, derivatives or other financial instruments related to them, during a limited
period of 30 working days prior to the announcement of an interim financial report or an
annual report. In addition, the disclosure of these financial reports must take place in
accordance with the rules of the trading platform on which the issuer's shares are listed
and also with the applicable national legislation. It follows from paragraph 12 of the
same article that an issuer may allow a member of its management to carry out
transactions for his own account or for the account of a third party during a limited
trading period, as mentioned in paragraph 11, in the following cases: (i) in exceptional
circumstances, on a case-by-case basis, such as serious financial problems requiring the
immediate sale of shares; or (ii) due to the characteristics of the trading involved in
transactions carried out under an employee participation scheme, guarantee schemes or
share entitlement, provided that there is no transfer of ownership of the relevant
securities. With this in mind, the use or attempted use of inside information in
commercial transactions, whether for one's own account or for the account of a third
party, should be clearly prohibited, as is clear from whereas (54) of MAR. It should be
noted that under Article 90(1) of MiCAR, no person in possession of inside information
may unlawfully disclose that information to third parties, unless the disclosure is made
in the normal course of an employment, professional or functional activity.

2. Prohibition of market manipulation

2.1. Market manipulation
Concepts such as market manipulation or abuse are as old as the financial markets
themselves. As such, due to the complex combination of factors needed to establish its
presence, market manipulation is a term that lacks regulatory definition47. At European
level, Article 15 of MAR prohibits “market manipulation or attempted market
manipulation”. Directive 2014/57/EU of the European Parliament and of the Council of
April 16, 2014 on criminal sanctions applicable to insider dealing and market
manipulation48, specifically enshrines in its Article 5 a set of market manipulation
activities that are in every way similar to the wording of Article 12 of MAR.
Domestically49, Articles 378 to 380a of the Portuguese Securities Code deal with crimes
against the market through abuse of information and market manipulation. As such,
market manipulation is not an easy concept to define, as there can be various causes for

46
WATSON LAW, “MiCAR - Market Abuse Prevention…”, op. cit. note 13.
47
WATSON LAW, “MiCAR - Market Abuse Prevention…”, op. cit. note 13.
48
Available at: https://eur-lex.europa.eu/legal-content/PT/TXT/?uri=CELEX%3A32014L0057 (last
consulted on 30.06.24).
49
Under Article 30 of MAR, national supervisory authorities are empowered to implement administrative
sanctions. Articles 7, 8 and 9 of Directive 2014/57/EU empower Member States to impose effective,
proportional and dissuasive criminal sanctions.

12
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it50. It should be noted that market manipulation consists on the practice of certain
conducts, which give false impressions or information to the markets, and this concept
should be combined with the concept of price manipulation (which differs from what is
observed by the conduct of the legitimate forces of supply and demand)51. In these
terms, one or more operators mislead the others, with this conduct constituting an
“obstacle to the process of price formation and discovery”52. To this end, most of the
time, they use high frequency algorithmic trading platforms53 (commonly known as
“high frequency trading”), and there are few trading strategies that are not considered
forms of market manipulation. To this extent, as is clear from its whereas (38), MAR
provides for market manipulation measures that “are capable of being adapted to new
forms of trading or new strategies that may be abusive”. Furthermore, to reflect “the fact
that trading in financial instruments is increasingly automated”, the definition of market
manipulation provides “examples of specific abusive strategies that may be carried out
by any available means of trading including algorithmic and high-frequency trading”.
The whereas also explains that the examples presented “are neither intended to be
exhaustive nor intended to suggest that the same strategies carried out by other means
would not also be abusive”.
MiCAR seems to follow this logic. Both MAR and MiCAR use generalized descriptions
of behaviour that can give rise to market manipulation in order to prohibit such
practices. And as with traditional financial markets, with the entry into force of MiCAR,
market manipulation activities became illegal in the EU54 under Article 91(1), (2) and
(3), depending on the case. Nevertheless, in the spirit of proportionality, this article

50
DIEGO LEIS, High Frequency Trading: Market Manipulation and Systemic Risks From an EU
Perspective, Universität Zürich, February 2012, 29-36,
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2108344 (last consulted on 30.06.24).
51
See in this regard the OICU-IOSCO report, Investigating and Prosecuting Market Manipulation,
Technical Committee of the International Organization of Securities Commissions, 2000, 13,
https://docplayer.net/11240121-Investigating-and-prosecuting-market-manipulation-technical-committee-
of-the-international-organization-of-securities-commissions.html (last consulted on 30.06.24).
52
Ibidem.
53
In the words of Article 4(1)(39) of MiFID II (from which the definition in Article 317-E(7) of the
Portuguese Securities Code has been fully adapted), algorithmic trading means “trading in financial
instruments where a computer algorithm automatically determines individual parameters of orders such as
whether to initiate the order, the timing, price or quantity of the order or how to manage the order after its
submission, with limited or no human intervention, and does not include any system that is only used for
the purpose of routing orders to one or more trading venues or for the processing of orders involving no
determination of any trading parameters or for the confirmation of orders or the post-trade processing of
executed transactions”. In this sense, it is not enough for orders to be routed, processed, confirmed and
executed by computer to be considered algorithmic trading, since algorithmic trading establishes the
trading criteria itself, specifically the start, timing, price, quantity or management method of orders. High-
frequency algorithmic trading, under the terms of Article 4(1)(40) of MiFID II, consists of a “high-
frequency algorithmic trading technique”, characterized by “infrastructure intended to minimize network
and other types of latencies”, which includes at least one of the following algorithmic order entries: co-
location, proximity hosting or high-speed direct electronic access. HFT is therefore defined as a
subdivision of algorithmic trading and consists of a “system-determination of order initiation, generation,
routing or execution without human intervention for individual trades or orders” and, as a result, presents
“high message intraday rates which constitute orders, quotes or cancellations”.
54
PATRICK HANSEN, “New Crypto Rules in the European Union - Gateway for Mass Adoption, or
Excessive Regulation?”, Standford Law School, Blog, 2021, https://law.stanford.edu/2021/01/12/new-
crypto-rules-in-the-eu-gateway-for-mass-adoption-or-excessive-regulation/ (last consulted on 30.06.24).

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applies a comparatively small set of market abuse rules to crypto-assets issuers. Despite
using the same indicators as MAR to identify situations of market abuse, the provisions
of MiCAR apply exclusively to crypto-assets transactions that require the participation
of CASPs. In this sense, as with MAR, these rules potentially apply worldwide and in
relation to crypto-assets that are admitted to trading on a platform operated by a CASP,
or for which a corresponding request to trade has been made, regardless of whether the
action or omission actually takes place on the trading platform 55. On the other hand,
MAR, adopted in 2014 in response to the financial crisis of 2007-2008, aims to regulate
not only financial instruments admitted to regulated trading platforms, but also
derivatives of these instruments traded over the counter (commonly known by the
abbreviation “OTC”), since abusive practices in these markets have been identified as
capable of influencing the underlying assets. MiCAR differs from this approach by not
mentioning peer-to-peer trading of crypto-assets in its specific market abuse regime.
This omission was probably included due to the small number of crypto-asset holders
who carry out their transactions without any assistance from CASPs. However, this
omission seems peculiar, considering the high capacity of peer-to-peer transactions to
exert a direct influence on the value of the market56. That said, it is important to
understand which conducts are considered lawful and unlawful. To this end, in addition
to studying the legal framework set out in MiCAR, it is important to analyze
“traditional” trading strategies and forms of market manipulation, including in the
crypto-assets market.

2.2. Trading strategies considered legal

There are some categories57 of strategies that are considered lawful, as long as they are
not taken to extremes58. Firstly, “market-making strategies”. Market makers59 ensure the
liquidity of stock exchanges. Specifically, they guarantee the purchase and sale of listed
securities according to the continuous delimitation of a certain purchase and sale price.
In other words, they guarantee the purchase and sale of listed securities through the
continuous submission of offers on both sides of the order book, continuously selling an
asset at the price of the best sale offer and, at the same time, buying at the price of the

55
BENJAMIN BECK, JASMINE CAROLIN SCHIMKE, MARCEL HÖRAUF, DR. PATRICK SCHOLL AND SVENJA
SCHENK, EU Markets in Crypto-Assets (MiCAR) Regulation Expected to Enter into Force in Early 2023,
Lexology, 2022,
https://www.lexology.com/library/detail.aspx?g=e8a26ed1-0513-411b-80c8-a8a7f14ee7fb (last visited on
30.06.24).
56
WATSON LAW, “MiCAR - Market Abuse Prevention…”, op. cit. note 13.
57
MIGUEL SANTOS ALMEIDA, “Introdução à Negociação de Alta Frequência”, Cadernos do Mercado de
Valores Mobiliários, Número 54, CMVM, 2016, 8; & PETER GOMBER, BJÖRN ARNDT, MARCO LUTAT, &
TIM UHLE, High-Frequency Trading, Goethe University Frankfurt Faculty of Economics and Business
Administration, June 2011, 24: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1858626 (last
consulted on 30.06.24).
58
In this regard, see Article 13 of MAR.
59
As a rule, market makers are financial credit institutions (banks) or brokerage firms. In this case,
market making means a special role in the formation of supply or demand arising from simple fact and
not necessarily from duty or mere legal permission. See SANTOS ALMEIDA, MIGUEL, “Introdução à
Negociação...”, op. cit. note 57, 9.

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best purchase offer. Profitability comes from appropriating the bid-ask spread from the
vast volume of transactions that are carried out60. Associated with this first strategy is
passive market making. In this case, market liquidity is ensured by submitting non-
marketable resting orders when certain prices are reached (and not immediately). In this
way, a large number of canceled or modified orders are generated while being updated,
with profitability being taken from the spread once again61. Secondly, the “arbitrage
strategy” should be mentioned. Whenever market makers have a delay in updating the
prices of a particular trading platform in relation to the price of other trading platforms,
we are dealing with an asymmetry of prices, since they are generated momentarily in
different markets with reference to the same asset62. In consequence, it may happen that
a given financial product is traded simultaneously on more than one trading platform,
and its ask price on one platform may temporarily (albeit for seconds) be lower than its
bid price on another platform. The profitability inherent in this strategy consists of
buying the product with the lowest price, profiting from the sale where it is highest 63.
Thirdly and finally, there are “directional strategies”, which encompass two aspects. On
the one hand, it is possible to establish a huge number of short positions in advance
(order anticipation), depending on price changes in very short periods of time. On the
other hand, it is possible to apply momentum ignition algorithms to cause a very sharp
increase in buy or sell orders, thereby attracting other investors to follow suit64. It
should be noted that if any of these strategies is taken to the extreme, it can be
considered a form of market manipulation65. In fact, these strategies are classified as
speculative, insofar as the intermediaries aim to profit through an expected development
in the stock prices. In other words, they interpret different types of signals and
information about the markets in order to help predict future price movements66. This
prediction often involves adopting more opportunistic strategies aimed at discovering
liquidity hidden within in the bid books67. This raises a number of doubts as to the
legality of certain conduct that is practiced within the scope of these trading strategies.

60
What's more, many platforms offer “trading incentive programs”, i.e. they offer commissions to
financial intermediaries who promote market liquidity, and these revenues constitute a considerable part
of this strategy. See SANTOS ALMEIDA, MIGUEL, “Introdução à Negociação...”, op. cit. note 57, 9.
61
THEO LYNN, JOHN G. MOONEY, PIERANGELO ROSATI, & MARK CUMMINS, “Disrupting Finance:
FinTech and Strategy in the 21st Century”, in Palgrave Studies in Digital Business & Enabling
Technologies, Palgrave Macmillan, 2019, 61-62,
https://www.researchgate.net/publication/329487546_Disrupting_Finance_FinTech_and_Strategy_in_the
_21st_Century (last consulted on 30.06.24).
62
SANTOS ALMEIDA, MIGUEL, “Introdução à Negociação...”, op. cit. note 57, 10.
63
It should be noted that, in general, arbitrage strategies are considered to be useful to the markets, since
they end up correcting discrepancies in price formation and contribute to their efficiency. See SANTOS
ALMEIDA, MIGUEL, “Introdução à Negociação...”, op. cit. note 57, 10.
64
THEO LYNN, JOHN G. MOONEY, PIERANGELO ROSATI, & MARK CUMMINS, “Disrupting Finance...”, op.
cit. note 61, 62.
65
See EUROPEAN SECURITIES AND MARKETS AUTHORITY (ESMA), ESMA's technical advice on possible
delegated acts concerning the Market Abuse Regulation, 2015,
https://www.esma.europa.eu/sites/default/files/library/2015/11/2015-224.pdf (last consulted on 30.06.24).
66
Among various other parameters, the observation of previous patterns in the evolution of stock prices,
news on macroeconomic developments, corporate announcements, industry reports, etc. See SANTOS
ALMEIDA, MIGUEL, “Introdução à Negociação...”, op. cit. note 57, 11.
67
SANTOS ALMEIDA, MIGUEL, “Introdução à Negociação...”, op. cit. note 57, 11.

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2.3. Forms of market manipulation considered illegal

Both the regulators and the market participants themselves aim to ensure that the
financial markets present fair procedures, specifically for the purpose of ensuring fair or
even equal treatment in terms of opportunities. However, this scenario is not reflected in
the profitability of all participants. On the contrary, in the context of a regulated market,
although the majority of participants comply with the procedural requirements, at the
same time they aim to profit at the expense of others68. Sometimes, certain conduct can
be considered market manipulation if it is carried out by a person who is in a position in
which they are or should be aware of the deceptive impact of their conduct. It is
precisely on the basis of these permissions that trading platforms enable the use of
multiple market manipulative strategies69, and it is possible to point out those that have
traditionally raised the most questions70. First of all, it is important to mention “phantom
liquidity”, which consists of the illusory and unreliable formation of the number of bids
that actually exist in the market, a value that serves as a parameter in calculating the
level of market liquidity71. Associated with this manipulative strategy is “spoofing”,
which boosts phantom liquidity by issuing false orders and creating an apparent
imbalance between supply and demand, in order to manipulate the bid-ask spread72.
“Layering” is a variant of spoofing and involves issuing a large number of false orders
on just one side of the market in order to create the appearance of high pressure and,
thus, manipulate the other side of the market73. Other forms of manipulation include
“quote stuffing”, which consists of issuing a vast volume of unexpected orders that are
canceled in milliseconds, essentially with the aim of bringing the market to a standstill.
This type of conduct can result in specific restrictions on market access, especially for
less sophisticated investors, given the slow speed of their operations 74. “Front running”

68
STEPHEN KIRCHNER, “High Frequency Trading: Fact and Fiction: Should HFT be hit with a Financial
Transaction Tax?”, in Policy, the journal of the Centre for Independent Studies, Vol. 31, No. 4, 2015-
2016, 14.
69
In this regard, see Article 12 of MAR.
70
FERNANDO GILBERTO, Negociação Algorítmica de Alta Frequência: Negócios à velocidade da luz,
VidaEconómica, 2015, 95-98; HAVAL RAWF HAMZA, The impacts of High-Frequency Trading on the
financial market‟s stability, MBA, Kent State University, 2015, 27-31,
https://etd.ohiolink.edu/pg_10?0::NO:10:P10_ACCESSION_NUM:kent1428416050 (last consulted on
30.06.24); CARLOS ARENILLAS, Hombres contra máquinas: High Frequency Trading, Economia Exterior,
2012, 24-27, http://www.carlosarenillas.es/docs/HombresContraMaquinas.pdf (last consulted on
30.06.24); & CHRIS ROSE, Dark Pools And Flash Orders: The Secret World Of Automated High-
Frequency Trading, Walden University, 2010, 12-14,
https://www.researchgate.net/publication/293022520_Dark_Pools_And_Flash_Orders_The_Secret_Worl
d_Of_Automated_High-Frequency_Trading (last consulted on 30.06.24).
71
GILBERTO, FERNANDO, Negociação Algorítmica..., op. cit. note 70, 95-98.
72
DOUGLAS CUMMING, FENG ZHAN, & MICHAEL AITKEN, High Frequency Trading and End- Of-Day
Manipulation, SSRN, 2012, 7, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2109920 (last
consulted on 30.06.24).
73
See CUMMING, Douglas, ZHAN, Feng & AITKEN, Michael, High Frequency..., op. cit. note 72, 7; &
COMISSÃO DO MERCADO DE VALORES MOBILIÁRIOS (CMVM), Relatório Anual 2012 sobre a Atividade
da CMVM e sobre os Mercados de Valores Mobiliários de 2012, 177-178,
https://www.cmvm.pt/pt/EstatisticasEstudosEPublicacoes/Publicacoes/RelatorioAnualDaCMVM/docume
nts/relat%C3%B3rioanual2012.pdf (last consulted on 30.06.24).
74
KIRCHNER, Stephen, “High Frequency Trading...”, op. cit. note 68, 13.

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and “smoking” are also forms of market manipulation. In the first case, efforts are made
to obtain information in advance which is not available (for example, the order book)
and which relates to operations which have not yet taken place on or off the trading
platforms, and this information is used for their own benefit75. The second case is the
registration of orders with more advantageous values than those practiced, in order to
induce low frequency traders to trade. The high frequency traders cancel the order
before executing it, essentially with the aim of profiting from the flow of orders issued
by the low frequency traders76. Finally, there is also “flash trading”, which consists of
using sophisticated algorithms to obtain information about other participants' orders
milliseconds before everyone else.77

2.4. Forms of market manipulation identified in the crypto-assets market

One of the classic examples of market manipulation in the crypto industry is the use of
large quantities of crypto-assets (often even by the so-called “crypto whales”) on
crypto-asset trading platforms to boost prices and make a profit. This type of market
manipulation, which is provided for in Article 91(1) and (2)(a) and (b) of MiCAR,
involves making transactions or placing fictitious orders with a view to distorting the
levels of demand and supply of a given crypto-asset, which is reflected in its abnormal
or artificial price78. Examples of this behavior include “pump and dump” schemes, in
which significant purchases of crypto-assets are made to artificially raise prices and
encourage other unsuspecting investors to buy as well. Other examples of this behavior
include the aforementioned forms of manipulation commonly known as “spoofing” or
even “layering”. As explained above, in this case multiple transaction orders are placed
to apparently increase trading volumes, but are canceled immediately before execution.
These practices aim to mislead the market and harm other investors, violating the
regulatory standards established by MiCAR to ensure market integrity and fairness.
Another important approach to market manipulation provided for in Article 91(2)(c) of
MiCAR consists of the direct public dissemination of false or misleading information
that has the potential to mislead market participants about the real supply and demand
for a given crypto-asset. It should be noted that due to the novelty of distributed ledger
technology (DLT), the often high volatility of prices and the concentration of ownership
of certain crypto-assets, these markets are particularly vulnerable to manipulative
practices.

3. Prevention and detection of market abuse

75
This form of manipulation is typically associated with the co-location regime. See Articles 7, 8 and 9 of
MAR.
76
HAMZA, HAVAL RAWF, The impacts of High-Frequency Trading..., op. cit. note 70, 27-31.
77
This technique can be the “trigger” for front running. See ARENILLAS, CARLOS, Hombres contra
máquinas..., op. cit. note 70, 24-27.
78
WATSON LAW, “MiCAR - Market Abuse Prevention…”, op. cit. note 13.

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Pursuant to Article 94(3)(c) of MiCAR, in order to carry out their duties under Title VI
on the prevention and prohibition of market abuse linked to crypto-assets, the competent
authorities must have, under national law, inter alia, at least the supervisory and
investigative powers to enter “the premises of natural and legal persons in order to seize
documents and data in any form where a reasonable suspicion exists that documents or
data relating to the subject matter of the inspection or investigation might be relevant to
prove a case of insider dealing or market manipulation”. In this sense, CASPs must
have appropriate mechanisms to keep records of all transactions, orders and services
related to the crypto-assets services they offer. In addition, they must also have systems
in place to detect possible market abuses committed by clients. This follows from
whereas (81) of MiCAR. According to whereas (84), CASPs operating crypto-assets
trading platforms must also have a transparent commission structure for the services
provided, essentially with a view to preventing the placement of orders that could
contribute to market abuse or disorderly trading conditions. By way of example, in the
event that the requesting CASP intends to operate a trading platform for crypto-assets,
the application for authorization as a crypto-assets service provider provided for in
Article 62(2) of MiCAR, among others, must be accompanied by “a description of the
operating rules of the trading platform and of the procedure and system to detect market
abuse”79.
In addition to these rules, there are also rules on the operation of a crypto-assets trading
platform. Pursuant to Article 76(7)(g) of MiCAR, CASPs operating a crypto-assets
trading platform must have effective systems, procedures and mechanisms in place to,
among other things, ensure that their trading systems: are capable of preventing or
detecting market abuse. In addition, they must inform the competent authority of their
home Member State whenever they identify cases of market abuse or attempted market
abuse occurring on or through their trading systems” (paragraph 8), and ensure that their
fee structures are transparent, fair and non-discriminatory and that they do not create
incentives to place, modify or cancel orders or to execute transactions in a way that
contributes to disorderly trading conditions or market abuse” (paragraph 13).
In this regard, whereas 98 of MiCAR states that the competent authorities should be
given adequate powers to supervise the issuance, public offering and admission to
trading of crypto-assets, including the ability to suspend or prohibit a public offering or
admission to trading of crypto-assets, as well as the provision of crypto-assets services,
in addition to investigating breaches of rules relating to market abuse. In this sense,
whereas (110) of MiCAR explains that the Commission has powers to adopt the
regulatory technical standards (RTS) drawn up by the European Banking Authority
(EBA) and ESMA with regard to the appropriate provisions, systems and procedures for
monitoring and detecting market abuse, which includes the notification model for

79
In the same logic, it follows from Article 60(1) and (7)(f) of MiCAR that a credit institution may
provide crypto-assets services if, at least 40 working days in advance, it notifies the competent authority
of its home Member State with “description of the operating rules of the trading platform and of the
procedures and system to detect market abuse, where it is intended to operate a trading platform for
crypto-assets” (among other necessary information).

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reporting suspicions of market abuse, and the coordination procedures between the
relevant competent authorities for the detection of market abuse80.
With the consultation paper of March 2024, ESMA advocates for the alignment of the
market abuse prevention and detection regimes outlined in MAR and MiCAR
concerning the regime of the suspicious transaction or order report81. Despite
highlighting the differences between financial instrument markets and crypto-asset
markets, with this alignment, ESMA aims to leverage and utilize the experience already
gained from the implementation of MAR. In this sense, and with the necessary additions
and adaptations resulting from the “crypto environment”, the part of the draft RTS
concerning provisions, systems, and procedures, as well as the notification template,
were largely based on Commission Delegated Regulation (EU) 2016/957 of 9 March
2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of
the Council with regard to regulatory technical standards for the appropriate
arrangements, systems and procedures as well as notification templates to be used for
preventing, detecting and reporting abusive practices or suspicious orders or
transactions82. The part concerning the coordination of procedures between competent
authorities for the detection and sanctioning of cross-border market abuse situations was
based on Commission Implementing Regulation (EU) 2020/1406 of 2 October 2020,
laying down implementing technical standards with regard to procedures and forms for
exchange of information and cooperation between competent authorities, ESMA, the
Commission and other entities under Articles 24(2) and 25 of Regulation (EU) No
596/2014 of the European Parliament and of the Council on market abuse83.

4. Administrative penalties and other administrative measures

The market abuse regimes in relation to financial instruments and crypto-assets differ in
terms of the types of sanctions they impose, which is understandable. As explained in
the introduction, unlike MiCAR, MAR is part of a sequence of legislative acts, one of
which is the aforementioned Directive 2014/57/EU on criminal sanctions applicable to
insider dealing and market manipulation84, which is still in force. This directive required
Member States to adopt a harmonized framework of criminal sanctions for market
abuse, which was complemented by the detailed definitions of offences and
administrative sanctions introduced by MAR in its Article 30 et seq. Unlike the regime

80
In addition, according to Article 61(3) of MiCAR on the provision of crypto-asset services on the sole
initiative of the client, to contribute to convergence and promote adequate supervision with regard to the
risk of abuse of this article, ESMA should also issue guidelines on supervisory practices to detect and
prevent circumvention of this regulation.
81
EUROPEAN SECURITIES MARKETS AUTHORITY (ESMA), Consultation Paper - Draft technical standards
and guidelines specifying certain requirements of the Markets in Crypto Assets Regulation (MiCA) on
detection and prevention of market abuse, investor protection and operational resilience – third
consultation paper, 2024, https://www.esma.europa.eu/document/consultation-paper-technical-standards-
specifying-certain-requirements-mica-3rd-package (last consulted on 30.06.24).
82
Available at: https://eur-lex.europa.eu/eli/reg_del/2016/957/oj (last consulted on 30.06.24).
83
Available at: https://eur-lex.europa.eu/eli/reg_impl/2020/1406/oj (last consulted on 30.06.24).
84
Available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32014L0057 (last
consulted on 30.06.24).

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provided for in MAR, so far the legislator has not expressly provided that intentional
and serious infractions of insider trading, unlawful disclosure of inside information and
market manipulation are punishable as crimes under MiCAR85. This issue has been left
to the discretion of individual Member States, as can be seen from Article 115(1) of
MiCAR86. In this sense, for the time being, there are quite a few questions regarding the
determination of criminal liability, which will not be developed in this article. Although
MiCAR does not exclude the right of Member States to establish criminal sanctions,
Article 111(5)(i) and (j) mentions, as an absolute minimum requirement, that the
competent authorities must be empowered to impose and adopt, at least, administrative
sanctions and measures. In the case of natural persons, the maximum fines are
1,000,000.00 € for infringements of Article 88 and 5,000,000 € for infringements of
Articles 89 to 9287. In the case of legal persons, the maximum fines are 2,500,000.00 €
for infringements of Article 8888 and 15,000,000.00 € for infringements of Articles 89
to 9289, or 2% of the total annual turnover of the legal person for infringements of
Article 88, and 15% for infringements of Articles 89 to 92. Both percentages are
calculated according to the latest available accounts approved by the management body,
or, alternatively, in Member States whose official currency is not the euro, the
equivalent in the official currency on June 29, 2023.

Conclusion
The relationship between MiCAR and MAR highlights the efforts to maintain the
integrity of financial markets and regulate the crypto-assets’ market, which is
characterized by constant evolution. Although MiCAR brings much-needed regulation
to the crypto ecosystem, it appears that continuous adjustments will be necessary to
ensure effectiveness and responsiveness. In addition, gauging the distinctive
characteristics and risks of the crypto-assets market within the existing European
regulatory framework, including MAR, requires continuous adaptation and supervision
to effectively protect investors and maintain the desired market integrity. In any case,
since MiCAR ends up representing a light version of the legislation that makes up this
framework, namely the Electronic Money Directive, the Prospectus Regulation, MiFID
II, MAR, and the Directive on Payment Services in the Internal Market, it is
questionable to what extent the creation of this legislation even makes sense. The main
loser is the issuer, which will have to assess the legal framework of the assets it intends
to issue based on multiple and different legal regimes, including the obsolete and
retrograde regime of the traditional financial markets (even if only to exclude). This
scenario of great uncertainty makes the already extremely complex case-by-case
85
WATSON LAW, “MiCAR - Market Abuse Prevention...”, op. cit. note 13.
86
BENJAMIN BECK, JASMINE CAROLIN SCHIMKE, MARCEL HÖRAUF, DR. PATRICK SCHOLL AND SVENJA
SCHENK, EU Markets in Crypto-Assets..., op. cit. note 55.
87
Articles on the prohibition of insider trading, the prohibition of market manipulation and the prevention
and detection of market abuse.
88
This refers to the public disclosure of inside information.
89
Articles on the prohibition of insider trading, the prohibition of market manipulation and the prevention
and detection of market abuse.

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analysis more difficult, and entails excessive costs in terms of due diligence and
compliance (in a sector full of SMEs and where most start-ups begin with non-existent
or a very low budget).

21